Microsoft has amplified its presence in the cloud communications landscape with the development of its Microsoft Teams application. As such, Cavell has received increasing interest from service providers who are looking to better understand the positioning of Microsoft Teams and its potential in the market as an additional revenue opportunity or as a competitive threat.
The collaboration market has emerged rapidly with the largest vendors in the sector including Slack, Zoom, Cisco, Google, and Microsoft.
Collaboration hubs, like Microsoft Teams, are now directly relevant for cloud communication service providers as they now incorporate voice and calling services.
Cavell has witnessed a dramatic shift in the cloud communications industry. We have seen a huge number of service providers and telecommunications orientated business look to incorporate Microsoft Teams, or supplementary Teams services, into their portfolios.
Opportunities for service providers with Microsoft Teams in their portfolio include:
Microsoft Teams opportunities for service providers
The Teams–related opportunity has become almost undeniable.
With the Teams application boasting over 115 million daily active users, even if many are using the applications most basic forms, the base market is there.
Cavell’s research shows that even though currently only a very small proportion of these users have telephony functionality enabled, that is set to increase.
The tantalising possibility of enabling telephony services to an increasing number of these 115 million users is one that has encouraged the industry ‘en masse’ to embrace Teams.
Microsoft 365 – the productivity subscription suite which includes Teams – now serves nearly 260 million monthly active users.
If Teams can increase its penetration into this number – seemingly quite low hanging fruit – the opportunity is amplified.
Working with Microsoft may require service providers to shift their existing business models. But with good reason.
Although there is some money to be made from reselling Microsoft licenses, service providers are unlikely to garner the same margin they might have when working with traditional softswitch communication vendors.
Providers are likely to make less than 15% margin reselling Microsoft licenses, and in some cases the margin opportunity will be considerably less.
Most customers already have competitive Microsoft purchasing agreements in place and in many cases larger companies will have enterprise licensing agreements with Microsoft directly – removing any licensing revenue opportunity.
This does not mean that communication service providers cannot make money by adding Microsoft Teams to their product portfolios.
Teams, and the wider Microsoft software portfolio, offers providers a wealth of revenue generation opportunities in supplementary areas.
Arguably the most relevant area of opportunity for communications industry providers surrounds voice and telephony integration – an area where their existing expertise can be used to their advantage.
Microsoft provides multiple routes for adding voice and telephony services for a Teams user – a feature that is not available within the standard application and must be purchased as an add-on.
This area provides a huge range of options for service providers who are looking to leverage the growing popularity of Teams.
From providing basic connectivity through to the provision of more advanced integrations (PBX, contact centre, etc), providers can offer their customers key business solutions and at the same time generate revenue from the demand for Teams.
Microsoft also provides its partners with other ways to increase monetisation.
Afterall 95% of its commercial revenue is partner driven and Microsoft says that for every $1 of revenue it generates, more than $9 dollars is generated for its partners.
Teams now certifies a list of compatible hardware endpoint devices. Partners can explore these to generate further supporting revenue streams.
Working with Microsoft may require a shift for service providers.
Traditionally, the Microsoft channel has made most of its revenue in supplementary areas including professional and managed service provision.
Communications service providers will need to be able to leverage these areas to make a real success of working with Microsoft and Teams.
Microsoft Teams voice and telephony
The most relevant aspects and functions of Microsoft Team’s application – for cloud communication service providers – are its provision voice services and calling.
Microsoft Teams can operate, within certain license packages, as a fully functioning phone system providing users with real phone numbers and the ability to make outbound calls to any number.
As well as offering PSTN voice services, organisations leveraging Teams can also equip users with physical SIP or IP devices provided by Microsoft’s eco-system of hardware partners.
Phone System is the Microsoft technology used to enable call control and traditional PBX functionality within Microsoft 365 cloud and Microsoft Teams.
Calls between an organisation’s internal users are routed internally and never go to the PSTN, regardless of geographical location as long as they are part of the same – or linked – Microsoft 365 tenancies.
When it comes connecting to external landline or mobile phone numbers, Teams offers voice and calling functionality in one of three ways:
- Calling plans
- Operator Connect
- Direct Connect (Direct Routing)
Let’s break down exactly what each of these is:
Microsoft calling plans
Microsoft offers organisations the option of utilising Microsoft as its telephony carrier.
Organisations must choose from Calling Plan licenses and assign them to Phone System users.
Microsoft provides options for both domestic and international calling plans based on company requirements.
A porting wizard is available with the Microsoft Teams Admin Center to assist businesses with transferring existing phone numbers from their current providers over to Teams.
Cloud voice services available from Microsoft also include basic PBX functionality like:
- Caller ID
- Dialling plans
- Call queuing
- Auto attendants
- Phone numbers
The list of PBX features available is being developed all the time with ‘Music on Hold’ one of the next announced features to be rolled out as part of the development plan.
This route allows organisations to connect to a select group of operators to enable PSTN calling, directly from within the Teams Admin Center.
The list of partners within the Operator Connect program currently includes:
- Deutsche Telekom
- Orange Business Services
- Pure IP
Enterprises will be able open an ‘Operators’ tab within the Admin Center and select phone numbers from the various operators and assign those numbers to individual Teams users.
Microsoft Teams Direct Routing
Microsoft Phone System Direct Routing allows organisations to connected certified Session Border Controllers (SBCs) to the Microsoft Phone Systems.
This allows businesses to configure on-premises PSTN connectivity to equip the Microsoft Teams client with external voice capabilities.
This configuration allows companies to utilise almost any trunking solution or interconnect alongside third-party PSTN equipment.
Customer-owned telephony equipment such as pre-existing PBX systems and analogue devices can interoperate with the Microsoft Phone System using this method.
The direct routing option is by the far most popular scenario deployed by organisations who use Teams as a fully functioning phone system. More than 90% of voice equipped deployments use this method.
So, what is direct routing?
For Service Providers, the primary avenue for collaboration with Microsoft Teams may orientate around the direct routing option.
For this to be enabled, Microsoft 365 users will require a license with the Phone System add on included.
Of course, as the organization will be utilising a Service Provider partner to provide PSTN connectivity, they will not require additional calling plans.
Service Provider partners must utilise a selection of Microsoft Certified Session Border Controllers to enable this infrastructure.
Organisations also have the option of a hybrid deployment approach requiring users to possess both a ‘Phone System’ add-on, calling plan add-on, and relationship with third party provider for direct routing PSTN connectivity.
This scenario would potentially be operated with a Microsoft Domestic calling plan for local calls and direct routing through a third-party provider to enable international calling capability.
The most effective routes to ensure compliant licensing models must be considered by service provider partners before deployment in the planning stage.
Due to the many potential configurations possible, cost comparisons should be completed to ensure that the end user organisation is utilising the most cost-effective model suitable for their individual connectivity requirements.
Cavell regularly conducts these exercises for service providers and resellers alike.
What is required to enable direct routing?
Service providers with the option of hosting or managing SBC devices to enable organisations using Teams to connect to the traditional phone network, or PSTN, can explore various deployment options.
End user organisations do have the possibility of operating an on-premises SBC which can be managed either directly or via a partner.
This would not be a recommended service provider deployment option due to the singularity of the scenario. But, in certain cases, customers may insist on local SBC deployment to connect to a local PBX system or for compliance purposes etc.
Service providers can provide a hosted SBC to provision a single customer using a variety of connectivity options including public or private internet.
There are advantages that service providers can offer to customers who utilise this scenario including consolidated support for PSTN and centralised PSTN access through multi-geo SIP trunking reducing PSTN contracts.
When utilising private networks or MPLS connectivity, end customer media can traverse the private network and be managed end to end if needed.
One of the primary models for SBC deployment is to offer end customers provision through a cloud–hosted SBC.
This deployment model allows service providers to offer end customers fast setup with added agility onboarding new customers.
With this option, as well as avoiding hardware footprint, provides maximum geographical flexibility and scalability according to customer requirements.
The cloud deployment of an SBC allows service providers to provision multi-tenant access.
This enables service providers to create a repeatable service for end customers looking to leverage direct routing connectivity for Microsoft Teams.
This scenario allows service providers to explore several business models for the provision of direct routing.
Service providers can host an SBC for multi-tenant access and provision this for other service providers or ICT partners to allow access for their end customers.
The primary service provider hosts an SBC, connects it to their SIP trunks, and configures another trunk between their hosted SBC and Microsoft Teams so that connectivity can be provisioned from the end user organisations tenancy.
Microsoft Teams telephony models for service providers
The number of communication specialists offering Direct Routing to enable telephony in Microsoft Teams has been growing as service providers look to take advantage of Teams’ growing popularity.
Direct Routing connectivity, or Direct Routing as-a-service, solutions are now offered by hundreds of providers globally.
Back at the start of 2020, over 55% of the cloud communications service providers that Cavell surveyed said they were looking to, or already offered some form of direct routing service for Microsoft Teams.
In recent surveys, which will be concluded by the end of April 2021, the proportion looks to have risen significantly.
Cavell’s research highlights a few key models for the integration of telephony with Microsoft Teams.
These models fall outside of Microsoft Calling Plans and Operator Connect as they are not open to the wider communications industry.
These potential models are highlighted below.
Many providers now offer basic access for Microsoft Teams by providing SIP Trunks.
SIP Trunks are generally priced on a cost per-channel, per-month basis.
Basic SIP Trunk provision would allow an enterprise to connect their own, or third-party managed, SBC device to the PSTN to provide connectivity into Microsoft Teams.
Direct Routing as-a-Service
This option is designed to allow organisations to enable telephony services within Microsoft Teams while removing the need for an enterprise to manage on-premises infrastructure or possess in-house technical expertise.
Generally Direct Routing as-a-service products include the SIP connectivity, managed SBC resource, and options covering carrier services such as phone numbers and minutes.
Microsoft Teams Direct Routing providers include:
- Pure IP
Enhanced Microsoft Teams telephony service
Offering all the features of Direct Routing as-a-service, an enhanced Microsoft Teams Telephony solution includes further benefits.
Vendors and providers will overlay additional advanced PBX functionality enabling an enterprise to overcome any potential shortcomings in Microsoft Phone System.
These enhanced offers also include improved integration capabilities, enhanced support provision, and more detailed analytics and reporting.
Microsoft Teams enhanced telephony providers include:
Confirming which type of telephony offering is most viable for their end customers will be a crucial decision for individual service providers when confirming their strategy.
Resource and development requirements differ massively in each area.
If you are considering your Microsoft strategy and want to discuss current industry trends, competitor behaviour, or understand more about the Microsoft Teams telephony market, book a free call with a Cavell consultant.
Microsoft Teams contact centre integration
One area of growing industry in the communications industry when it comes to Microsoft Teams is contact centre integration.
Microsoft has a vast portfolio covering devices and hardware, end user productivity software to high-end infrastructure solutions.
One area where it doesn’t currently have huge provision of solutions is in the realm of customer experience (CX).
Microsoft does not have a contact centre, or equivalent software package, and there is currently no provision within Microsoft Teams to help organisations use the platform to streamline customer communication.
The cloud communication industry has stepped up with increasing numbers of providers now offering integrated contact centre solutions into Microsoft Teams.
Microsoft is supporting third-party providers to integrate contact centre services into Teams in a couple of different ways.
Firstly, it has several available Application Programming Interfaces (APIs) available that allows third-party contact centre specialists to develop specific contact centre applications and tools to integrate with Teams.
Microsoft has also launched its Connected Contact Center Microsoft Teams Certification Program which includes some of the CX industry’s leading brands.
Already certified are solutions from:
Brands in the certification process as of March 2021 include Five9, Genesys, and NICE inContact.
With the global contact centre-as-a-service market set to exceed $35BN by 2026, and the Microsoft Teams user base continuing to grow, service providers should consider the option of combining both solutions as a real opportunity.
Microsoft Teams devices
This area of Microsoft Teams opportunity should be familiar to most communications service providers – reselling hardware endpoints.
A great revenue and margin opportunity has not been altered in the Microsoft Teams world with a selection of Microsoft certified endpoint devices now available from the world’s leading technology vendors including Yealink, Poly, Jabra, and Crestron.
The type of device generally falls with one of six key categories
- Desk phones and Team displays
- Teams Rooms
- Web cameras
- Room system accessories
All the devices available have been developed specifically by the manufacturers and certified by Microsoft to work with Teams offering the best in terms of quality, familiarity, and deployment and management.
Margins of up to 60% can be leveraged on certain devices so this is one key are not to be neglected by service providers when considering the opportunity provided by Microsoft Teams.
Despite fluctuating demand for physical devices, there is still widespread demand from businesses for endpoints including handsets and headsets.
Across all markets, the prevailing trend in the device space was that desk phone use fell 2%, from 2019 to 2020.
But, headset usage increased, implying that these people switched to either using mobile or softphones via other devices.
Demand for endpoint devices is clear still, and demand for specific Teams devices is only going to increase, providing another area of opportunity for service providers to capitalise on.
Microsoft supplementary services
Possibly the most vital area for service providers to explore when considering their Microsoft strategy is the provision of supplementary services.
Microsoft has said that by utilising Teams as a primary hub for teamwork, partners can expand services and extend revenue streams into new areas of customer estates.
There are four key areas outlined where partners can add additional value to Microsoft technology lifecycles.
These areas are:
Margin opportunities covering both professional and managed services are vast.
Providing the service provider has the right technical capabilities and expertise, you can leverage these to create a thriving Microsoft practice/
Exploiting this growing opportunity might not be simple for traditional stakeholders within cloud communications.
Microsoft’s partner model requires more arguably more in-depth integration and knowledge than those of traditional switch vendors.
Service providers cannot expect to leverage the same level of licensing margin in a Microsoft Teams telephony environment.
A successful supplementary play in the Teams telephony space will require more strategic integration.
Traditional Microsoft partners will be more accustomed to the model required; one built on supplementary supporting services.
Communications specialists should leverage their existing expertise to offer end customers valuable services that support Microsoft Teams.
Cavell has examined a widespread selection of provider services and highlighted key areas that could be explored to create service opportunities.
Taking advantage of customer demand for Teams and their requirements for these specialist communication services could provide service providers with the widest set of opportunities.
Some of these opportunities might sound more complex than some of the more traditional license resale or agent models that have proliferated in the cloud communications industry, but it is in Microsoft’s interest to help partners exploit them.
Telecommunications is one area of Microsoft’s portfolio that you might say technical and operational experience is lacking, despite its recent acquisition of Metaswitch.
Microsoft wants to leverage the cloud communications industry for its expertise so that it can help drive through new innovative opportunities, allowing both to thrive.
As interest in the Teams opportunity continues to grow, it becomes apparent that this is just the first point of contact for Microsoft.
Microsoft will be hoping that many of the new partners and providers engaging with Teams will continue to explore the possibilities and find much more behind the scenes than just a direct routing offer.